The 1994 AGM of Mec Vannin, held in
April, passed a resolution to review its stance on the finance sector.
A committee was elected and submissions taken. The following report is
the result.

Report of the Finance Sector Policy
Review Committee of Mec Vannin, May 1994.

Not surprisingly, given the make-up of
the committee and the lack of any submissions in favour of abandoning the
current policy of fundamental opposition to the finance sector, the main
recommendation that we unanimously make is that Mec Vannin remain opposed
in principle to the presence of the finance sector in Mann. The reasons
behind this recommendation are laid out in Part One of this report.

Part Two deals with the other task given
to this committee at the 1993 A.G.M.: how to lessen our dependence on the
finance sector and what alternative economic path to follow.

Broadly, it recommends two things:

1) "Capping-off' the finance sector at
its present size as a short term measure to prevent us becoming any more
dependent on this industry and:

2) a long term fundamental shift away from
using our fiscal independence to entice foreign business and toward using
the same powers to give our own people the economic advantages necessary
to foster a diverse, indigenous economic base.

The committee appends a comprehensive submission
from Mark Kermode that broadly concurs with our findings.

WHY MEC VANNIN SHOULD CONTINUE IN ITS FUNDAMENTAL
OPPOSITION TO THE FINANCE SECTOR

PART ONE - INTRODUCTION.

Opposition to the finance sector usually
focuses on the shady disreputable nature of the business and the damaging,
environmental, economic, political and cultural impacts it has on the Isle
of Man and elsewhere. After outlining these reasons for continuing to oppose
the presence and further growth of this industry, we want to move on and
look at an important underlying reason why Mec Vannin, and indeed the Manx
people, cannot afford to reach a compromise and learn to live with the
finance sector.

GOVERNMENT ECONOMIC POLICY.

The government case for the finance sector
is fairly easy to summarise. The government has set itself the ambitious
but misconceived and narrow economic goal of maximising the incomes and
spending power of people living in the Isle of Man. Its initial aim is
to match the standard of living of the U.K and eventually to raise us up
to the dizzy heights of the likes of Switzerland. It can only do this in
the short timescale it has set itself by handing over free use of the Isle
of Man as an offshore base to some high earning foreign industry like the
finance sector. The underlying belief seems to be that given the money
first of all, we can then buy solutions for all our other social and environmental
problems.

1. THE DOWNWARD ECONOMIC SPIRAL.

The trouble with the above view is that
the more money we make, the more money we need to tackle the new problems
thrown up by runaway economic growth i.e. more finance sector means more
people, means more schools, houses, hospitals, sewers, power stations,
pollution, stress and crime, means more money, more finance sector, more
population growth etc. ad infinitum. This is the madhouse economics of
money addiction in which the real quality of life is sacrificed for excessive
material consumption.

2. ILL GOTTEN GAINS.

The chief contention here is that the Manx
Government's economic policy and the resultant of recent years is founded
on a lie. The lie is that the finance sector is now a model of legal reputable
and well regulated money making activity for the benefit of the Manx people
thanks to the regulations and supervision set up in the wake of the S.I.B.
scandal more than a decade ago.

Even if this were a true and accurate portrayal
(and given the reactive, rather than investigatory role of the Government
supervisory bodies and the smallness of the Isle of Man fraud squad, it
is hard to see how it could be), it conveniently ignores the real issue:
That is, from where and from what activities do the monies that pass through
the finance sector and keep our economy afloat come from, before they broach
our shores?

Thus on the one hand we have the visible
high profile "smiling face" side of the finance sector consisting of all
those off-shore subsidiaries of international banks, building societies,
pension and insurance funds etc. which now form the backbone of the tax
haven. The main business here is to exploit other countries' tax loopholes
in order to aid and abet rich companies and individuals in the avoidance
of their tax dues, and to invest the money thus salted away in the most
profitable way around the world. Even though mostly legal, the business
could at best be described as amoral in character i.e. its sole concern
is with the making of maximum profit to the exclusion of all other social
and environmental costs and ethical considerations such as the creation
of Third World debt and impoverishment.

On the other hand, we have evidence that
the smiling face of the finance sector masks a deeper layer of out and
out criminal activities. The investigations by the U.S. Government into
the Caribbean taxhavens on its doorstep have shown that the self same off-shore
mechanisms and secrecy legislation that enable tax avoidance also and invariably
provide a conduit and cover for all kinds of dirty money laundering from
such sources as terrorism, drugs, fraud and larceny. The Brinks-Matt investigations
by the U.K. police which revealed the Isle of Man finance sector involvement
in just such a chain of money-laundering, indicates that the Isle of Man
is no different. The only difference in this part of the world is that
no authority, least of all the Manx Government, has systematically investigated
the underworld of the Isle of Man finance sector.

3. MANN FOR THE BANKS.

In the blind pursuit of money and economic
growth, and lacking the imagination to find an alternative, successive
Tynwalds since the late '60s have allowed and encouraged the finance sector
to grow uncontrolled to politically dangerous and economically unhealthy
proportions. The finance sector, which is the largest single sectoral contributor
to the Manx economy, now generates some 35% of national income directly
and much of the remaining economic life in Mann, such as the building industry,
is intimately dependent on it.

In theory Tynwald still runs the show,
but in practice it dare not legislate against the interests of the finance
sector community. In recent years, income tax bills have been withdrawn
at the final legislative stage when pressure groups such as the Chamber
of Commerce have cried, "foul." More recently the Civil jurisdiction and
judgements Bill 1993 was scrapped after a vociferous campaign of opposition
from a posse of leading finance sector institutions who perceived a threat
to their tax haven autonomy from an extension of European law to the Island.
Normally, such public outbursts are unnecessary as the realities of political
power and mutual interest are obvious to all. The Isle of Man is but one
of a plethora of tax havens in the highly competitive world of off-shore
finance. We now depend on them far more than they on us.

If we have not already passed the point
of no return, further unfettered growth of the finance sector will make
a mockery of our cherished "home rule" and cancel out the constitutional
moves to greater autonomy from London. The real decisions will increasingly
be made by and for the interests of the largely foreign owned finance sector
companies with Tynwald providing the appropriate political window dressing.

YN GORLEY MANNINAGH: THE MANX DISEASE.

The foregoing arguments have tried to show
some of the reasons why the finance sector is a user-unfriendly industry
for the Isle of Man. However, to direct all our attacks against the industry
itself rather than the underlying thinking that brought it into being,
is to treat the symptoms rather than the real cause. That is to say, the
finance sector presence here is an expression of the values and assumptions
of Manx decision makers brought up in a tradition of collective cultural
inferiority. This sense of inferiority stems ultimately from the collapse
of the crofting way of life in the 19th century and was given a new lease
of life by the so-called "spuds 'n herrin" slump of the 1950s.

The assumptions are that the Isle of Man
has no innate resources on which to base a successful economy and that
the Manx people are economically backward and incapable of shaping their
own economic future.

The concomitant to this line of thinking
is that all capital, ideas of economic development and expertise (the economically
active person) must be imported from the "advanced" countries around us.
Hence the reason why the Government has handed over the creation and running
of the economy to foreign financial and industrial interests, and why the
Manx as a living cultural entity are on the way out if present trends continue.

If Mec Vannin puts its anti-finance sector
campaign onto the "back-burner" to gain some sort of immediate political
acceptance and supposed electoral credibility it will, in effect, signal
its acceptance of this political philosophy of Manx inferiority.

PART TWO - HOW TO LESSEN DEPENDENCE ON
THE FINANCE SECTOR AND WHAT TO PUT IN ITS PLACE.

INTRODUCTION.

There is no easy "off the peg" answer to
the question of finding an alternative to economic reliance on the finance
sector. What is clear, however, is the necessity for a small cultural entity
like the Isle of Man, which wishes to survive and develop in its own manner,
to retain overall control of its economic life. To do this it must guard
against any one economic interest group, especially one, in the main owned
and run from outside the Island, from rising to dominance as its paymaster-general.

DAMAGE LIMITATION.

A prerequisite, therefore, to any search
for alternatives to the finance sector has to be the limitation of further
growth in this area. This sub-comrnittee believes this could be achieved
by "licence capping" the industry i.e. by restricting the issue of new
banking and insurance licences to keep the sector at its present level.
New licences would be issued only to replace business lost through natural
wastage. Instead of scrapping the industry altogether, which would cause
economic dislocation and distress, the intention would be to contain it
while real efforts are made to develop indigenous industries, both traditional
and new.

It is also the opinion of this subcommittee
that, in general, no one sector of the economy, be it tourism as in the
past or manufacturing and finance today, should be allowed to grow to the
point where its contribution to national income exceeds a certain proportion
- say 15% for argument's sake. This is based on the principle which Manx
history teaches that the stability of a small island economy depends on
diversity.

WHAT TO PUT IN ITS PLACE.

It is dismaying how little support from
our own government is available to Manx people trying to make a decent
living for themselves in their own country. Instead, the government makes
life doubly difficult for its own people by making strenuous efforts to
attract economic activity, personnel, ideas, in fact nigh on the whole
economy from abroad. As a result of this lazy man's economic policy, responsibility
for economic affairs is handed over to foreign businesses and Manx people
have to compete with people from all over Great Britain and Ireland, and
sometimes beyond, for work and jobs in their own land, jobs at all levels
such as farrier, road safety officer and building tradesmen as well as
most of the "high flyer" positions. In this free-market-free for all the
Manx people are reduced to the status of a cheap, flexible workforce for
incoming entrepeneurs; passive recipients of employment, rather than active
participants in shaping their own independent future. Mec Vannin, we believe,
should continue to campaign for an end to this destructive trend and its
replacement by economic policies which empower and protect the Manx people.

THE MEANS

Much the same ways and means which Tynwald
has used with such effect to make the Isle of Man an advantageous place
for the finance sector and others to do business could, instead, be redirected
to favour those who want to live and work in Mann for its own sake. We
foresee at least two essential elements for such an alternative development
plan:

1. A fiscal framework favouring the people
here.

2. The economic empowerment of ordinary
people through access to capital, knowledge, advice and training.

1. Fiscal Measures.

With its virtual fiscal autonomy in domestic
affairs, Tynwald has the power to create an economic microclimate here
in which home-grown enterprise could flourish. For instance, the Isle of
Man used to be a significant centre of shipbuilding in the 19th century
because until 1866, the duty on imported timber was less here than elsewhere.
A whole range of activities including a modern leisure-boat building industry
could prosper given the right cosseting by government through fiscal and
tax preferences.

2. Economic Empowerment.

Measures of economic empowerment would
be vital to allow ordinary Manx people to take advantage of the above.
These measures might include a non-profit making community bank or credit
union from which low interest, long term loans would be available to those
with little or no capital; grants from government to enable attendance
on vocational courses on and off the Island; a free small business advice
and resource service; specific training at the Isle of Man College: a co-operative
development agency.

The overall aim would be to stimulate economic
growth at the grassroots, an area relatively neglected at the moment by
government in favour of attracting and aiding up and running medium to
large scale concerns from outside. In order to benefit Manx workers, rather
than encouraging more immigration, the availability of grants, loans and
training would have to be restricted according to some definition of Manx
citizenship, the nature of which is outside the scope of this discussion.

WHAT KINDS OF ACTIVITIES?

In spite of current government policies,
we can already see some examples of the kind of diverse, small scale activity
we would like to see as commonplace e.g. farmers converting redundant outbuildings
to holiday accommodation and running farm shops to supplement their incomes;
hoteliers providing special interest holidays for those interested in birdwatching,
rambling etc; an independent brewer providing real ale.

In addition we would suggest that there
is scope here for the development of an energy conservation industry, a
boat building industry as aforementioned; an ethical investment industry;
an education industry centred possibly on a Manx University.

The government might claim to be identifying
and supporting such initiatives already. The difference compared with our
approach lies in the fact that the government searches far and wide across
the world to attract an up and running business to fill an economic opportunity
here. What they ought to be doing if they were really nationally minded
is to make the opportunity available first to the people here even though
this might take longer and involve investment in training and acquiring
skills.

It is often stated (overstated infact)
that this is a land deficient in resources. The chief resource which is
lacking at the moment, we feel, is a belief by the government in the resourcefulness
and worth of its own people.